Comparative Study of the Impacts of U.S. Electric Deregulation on Renewable Energy Investments and Retail Electricity Prices in Florida, Massachusetts, and Texas
Jang, Peter Y
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The U.S. electricity industry has experienced active deregulation policies with the federal Energy Policy Act in 1992, following the precedents of other industries in trucking, telecommunications, airline, and natural gas in the 1970s and 1980s. Electric deregulation policies demonstrated clear objectives: demolish the industry’s monopoly of vertically integrated investor owned utilities and encourage more investments in environment-friendly renewable energy. This dissertation paper analyzes 29 years of historical observation period from 1990 to 2018, to investigate the impacts of U.S. electric deregulation on the levels of renewable energy investments and retail electricity prices. The electric deregulation included the U.S. electric deregulation and tax incentives at a federal level, and the renewable portfolio standard (RPS) and deregulation policies at state level. Three states are selected for this comparative study: one regulated state of Florida (FL), and two deregulated states of Massachusetts (MA) and Texas (TX), who have taken different pathways in the deregulation. Empirical results from factor analysis and regression models showed that the investment levels of renewable energy capacity in regulated Florida were affected by two significant variables, the state’s electric price and the federal deregulation. The two variables showed negative coefficients in affecting the investment level in the state, indicating that the regulated state saw renewable energy developments negatively affected by increased electric prices and federal deregulation policies. On the other hand, in the two deregulated states were positively influenced by the state RPS programs (in both MA and TX), the state’s electric prices and federal tax incentives (in TX), while the federal deregulation was not significant at the 10% level in the two deregulated states. The analysis results also showed that the electric prices in regulated Florida was positively influenced by the state’s natural gas price, and its gas-fired capacity level, with the federal deregulation insignificant. In deregulated states of Massachusetts and Texas, the electric prices were influenced by the state deregulation of retail competition, not the federal deregulation. In Massachusetts, electric price was negatively influenced, or lowered, by the implementation of retail competition, compared to Texas where the price was positively influenced, or increased, by the state retail competition. To examine any consistent characteristics among the two types of electric markets, regulated and deregulated, this paper applied the same significant explanatory variables from the three states to build models for their neighboring states: a regulated state of Alabama and a deregulated state of Connecticut. The test application results showed that the influencing variables are not necessarily uniform, varying by the state, on the renewable energy investments and electric prices. Reasons for the differences, whether regulated or deregulated, may be attributable to the differences in individual states’ own agenda and commitment levels in implementing energy policies.